Cooling Housing Market For Buyers
Cooling Housing Market Offers Opportunity For Buyers
The economy is soaring, and unemployment is at its lowest level in decades. These two indicators would suggest that new home sales are rising.
That’s not the case this year because new home sales are sagging. In addition to growing new home inventories, mortgage rates remain low. This combination is favorable to anyone looking to buy a home.
What’s currently occurring in the housing market is what Real Estate experts call “rebalancing.” The housing market is moving towards a better equilibrium after several years of escalating prices and high demand.
Ultimately, despite a strong economy, the housing market simply couldn’t continue to grow. This paradox is not what people expect during a strong economy, but the reality is that most housing indexes show a downturn in new home sales.
The Reasons for Declining New Home Sales
One of the primary reasons that new homes sales slowed is: less demand. Reports have shown that housing demand is down 10 percent compared to the same time last year. Particularly affected are single-family homes that saw a drop of 22 percent in September from November 2017. The decline in demand is across the country with a few exceptions.
Another reason demand has been low is that mortgage rates have increased beyond 5 percent. Some potential buyers are not comfortable with this rate and are wanting the lower rates from several years ago. The likelihood of 3 or 4 percent interest rates returning are minimal at best. There is a correlation between a growing economy and increasing mortgage rates.
All indications are that the economy will continue to grow and higher interest rates to follow suit. Many of these potential homebuyers are millennials who don’t have much of a recollection of higher mortgage rates. They became accustomed to exceptionally low rates that followed the housing market crisis of 2008.
Favorable Factors Benefit Home Buyers
The housing market’s cooling is favorable to interested buyers looking to buy a home. Mortgages rates are expected to increase in 2019 and beyond, a lot of money can be saved by getting a mortgage with current rates. A difference of a half percentage point alone can either save or increase the total interest by tens of thousands of dollars over the tenure of the mortgage.
One of the best ways to foretell future mortgage rates is to follow The Federal Reserve. After several years of cutting rates due to the recession, they have started to systematically increase them. All expectations are that they will continue to do so for the foreseeable future.
Another factor that benefits home buyers is that they are in better position to negotiate considering large inventories of new homes. The sellers have to be accommodating to buyers if they want to sell a home.
In the current housing market climate, home buyers can negotiate a house in better condition by negotiating repairs to the property. These types of demands in a seller market are less likely because sellers have less of an incentive due to higher demand for their property.
Also beneficial to new home buyers is that prices have stabilized. Some areas and neighborhoods will also see prices decline. Compare this to couple of years ago when prices were soaring, and there’s good reason for home buyers to smile.
To take advantage of the current market conditions, and to buy or sell a home, contact your trusted local Realtor today.